The Illinois Landlord’s Guide to Security Deposits

In landlord-tenant matters I represent property owners only. I do not represent tenants. Tenants who need help can call Cook County Legal Aid for Housing and Debt at (855) 956-5763.

Here is the rule most Illinois landlords still get wrong: since January 1, 2024, the Illinois Security Deposit Return Act (765 ILCS 710) applies to every residential landlord in the state. Public Act 103-224 deleted the old "5 or more units" threshold. If you rent out a single condo in Naperville, the statutory deadlines now apply to you: 30 days to itemize deductions, 45 days to return the money, and twice the deposit plus attorney's fees if a judge decides you handled it in bad faith.

I handle 150-plus evictions a year across Cook, DuPage, Kane, and Lake Counties, and the single most expensive mistake I see landlords make isn't a bad tenant. It's a mishandled $1,800 deposit that turns into a five-figure judgment in the middle of their own eviction case. Half the landlords I meet are still operating on the pre-2024 version of this law. Here's the current framework, and the checklist I give my own clients.

Which Law Covers Your Deposit?

These stack. A 30-unit building in Chicago answers to both state acts and the RLTO. The Cook County RTLO does not apply inside Chicago, and a handful of suburbs that keep their own landlord-tenant ordinances (Evanston, Oak Park, and Mount Prospect) follow their own rules instead. DuPage, Kane, Will, and Lake County landlords deal with the state acts only.

The Security Deposit Return Act: Now It's Everyone

The 2024 amendment is the big story, so let me say it plainly: the unit-count threshold is gone. 765 ILCS 710 reaches every residential lessor in Illinois. The mechanics:

1. Within 30 days of the tenant vacating (or the date their right of possession ends, whichever is later), deliver an itemized statement of the damage you're deducting for, attaching paid receipts or estimates of cost.
2. If you used estimates, deliver the actual paid receipts within 30 days after the statement.
3. If you supply no statement at all, return the deposit in full within 45 days of the date the tenant vacated.

The statute now expressly allows delivery by personal service, postmarked mail to the tenant's last known address, or email to a verified email address the tenant provided, another piece of the 2024 cleanup. Get the tenant's email in the lease and this deadline gets much easier to hit.

The penalty: a landlord who refuses to supply the itemized statement, or supplies one in bad faith, and fails to return the deposit on time is liable for twice the deposit plus court costs and attorney's fees. Note the standard: bad faith. An honest, documented dispute about whether that carpet was damage or wear is not supposed to trigger the doubler. Sloppy silence is.

Two limits people miss. Normal wear and tear is never deductible: nail holes, traffic-worn carpet, faded paint after a three-year tenancy. And unpaid rent can be deducted without the damage-itemization rigmarole, but write it down anyway. Judges like paper.

The Security Deposit Interest Act: 25 Units and Up

765 ILCS 715 still has its threshold: it applies when you rent 25 or more units in one building or a complex of buildings on contiguous parcels. If you hold a deposit longer than six months, you owe interest at the rate paid on minimum-deposit passbook savings accounts by the largest commercial bank in Illinois as of December 31 of the prior year. That rate has been a rounding error for years, but the penalty is not.

Interest must be paid in cash or as a rent credit within 30 days after the end of each 12-month rental period. A landlord who willfully fails to pay owes an amount equal to the entire deposit, plus costs and attorney's fees. Yes: skipping a $1.80 interest payment can cost you the whole $1,800.

Chicago's RLTO 5-12-080: Where Deposits Go to Die

The City's mandatory RLTO Summary repeats these deposit rules to every tenant, so assume yours has read them. The RLTO covers most Chicago rentals; the main exemption is owner-occupied buildings of six units or fewer. For covered units, Section 5-12-080 requires all of the following:

• A receipt showing the amount, the date, a description of the unit, and the signature of the person taking the deposit (electronic receipts are permitted for electronic payments).
• A segregated account. The deposit goes into a federally insured, interest-bearing account at an Illinois financial institution, and it cannot be commingled with your own assets. The financial institution must be disclosed to the tenant.
• Annual interest at the City Comptroller's published rate (0.01% for 2026, the same rate every year since 2017), paid or credited within 30 days after each 12-month period.
• Return within 45 days of the tenant vacating, with an itemized statement of any deductions within 30 days.

The penalty for getting it wrong: return of the deposit, plus damages of two times the deposit, plus interest, plus the tenant's attorney's fees under the RLTO's fee-shifting provision. Chicago courts have applied these penalties to honest paperwork mistakes, and while the ordinance was amended years ago to soften a few traps (there's a limited cure path for interest-payment errors), you should treat 5-12-080 as strict liability and behave accordingly. There is no practical "I didn't know" defense, which is exactly why tenant-side firms audit deposits first. My RLTO defense practice is built around these claims.

Suburban Cook County: The RTLO

Since June 1, 2021, the Cook County RTLO covers most rentals in suburban Cook County. Its deposit rules are tighter than the state's in two ways: the deposit is capped at one and a half months' rent, and it must come back within 30 days of move-out with an itemized list of deductions. Violations cost two times the deposit plus attorney's fees, same shape as Chicago. Owner-occupied small buildings are exempt, but the thresholds differ from the RLTO's, so check before assuming.

Bought a Rented Building? You Bought Its Deposits Too

The call comes a few weeks after closing. A tenant moves out and asks the new owner for the deposit. The new owner never saw that money. The seller kept it. Buying one now? Start with my occupied building checklist.

That does not get the buyer off the hook. In Illinois, liability for the security deposit follows the buyer. The tenant can collect from you, even if the seller never paid you a dollar.

Three laws say this in nearly the same words:

• Statewide. Section 1.1 of the Security Deposit Return Act (765 ILCS 710/1.1) covers any sale, lease, or other transfer. The transferee is liable to the tenant for the deposit, statutory interest, and prepaid rent. The transferor stays jointly and severally liable. The section does not apply to a transfer to the holder of a lien interest.
• Chicago. RLTO 5-12-080(e) makes the successor landlord liable for the deposit, interest, and prepaid rent. It adds two deadlines. The seller stays jointly and severally liable until two things happen within 10 days. It transfers the deposit, and it notifies the tenant in writing. The buyer must notify each tenant in writing within 14 days of the transfer. In Chicago, a lienholder who takes ownership is also a successor landlord (5-12-030(i)).
• Suburban Cook County. The Cook County RTLO, Sec. 42-111(j) to (l) (enacted as 42-811), follows the Chicago model. The buyer is liable for the deposit. The seller gets released only by a transfer plus written notice within 10 days. The buyer owes its own written notice within 14 days.

The Chicago penalty is the one that hurts. Section 5-12-080(f)(1) awards two times the deposit for any failure to comply with subsections (a) through (e). The buyer's 14-day notice sits in subsection (e). So the ordinance text puts a missed notice letter in the same doubler as a deposit that never came back. Suburban Cook is softer. There the tenant must send written notice first, and you get 2 business days to cure (42-111(m)(2)).

What I Put in the Closing File

1. A deposit ledger for every unit. Amount, date received, bank, and interest paid to date.
2. The deposits as a closing credit. Take every deposit and its accrued interest at closing. Paper the transfer.
3. The seller's transfer notice. In Chicago and suburban Cook, the seller sends it within 10 days. That notice releases the seller, not you.
4. Your own notice, within 14 days. Calendar the date at closing. State that you hold the deposit. Give your name, business address, and a business phone number for you or your agent.
5. A new bank notice. In Chicago, move the deposits into your own segregated account. Tell each tenant the new bank's name and address in writing within 14 days (5-12-080(a)(3)). Suburban Cook has a 14-day rule too (42-111(g)).

My guide to buying a building with the tenant still in it covers the rest of the closing package: leases, rent ledgers, and the first 30 days.

Move-In Fees and the New Illinois Fee Law: What's Actually Changing

For years the standard Chicago play has been to skip the deposit entirely and charge a non-refundable move-in fee, which sits outside 5-12-080's machinery. That is still lawful today. But the ground is shifting, and you should know exactly where it stands as I write this in June 2026:

• HB 3564, the Rental Fee Transparency and Limitations Act, has now been signed into law. The version as introduced would have banned move-in fees outright and capped deposits at one month's rent. The enrolled version does neither. What survived: a ban on eleven categories of fees (lease renewal fees, after-hours maintenance and hotline charges, routine-maintenance fees, eviction-notice fees before a court order, pest-control fees where the tenant didn't cause the problem, and, notably, fees for in-person walk-throughs at move-in or move-out), a $50 cap on application fees with a narrow third-party exception, and a requirement that every non-optional fee appear on the first page of the lease. A fee that isn't listed there is not collectible.
• HB 5234, the trailer bill, has also been signed, and moves the effective date from July 1, 2026 to January 1, 2027.

Practical translation: a genuine, disclosed move-in fee survives this round of legislation, but label it carefully (a "walk-through fee" is banned by name), put it on page one of the lease, disclose it in your listings, and understand that Springfield tried to ban it this session and will likely try again. If your business model depends on move-in fees, have a deposit-compliance plan ready. And the label doesn't control in court: if you refund the "fee" to good tenants, a judge will call it a deposit and apply 5-12-080 anyway.

The Compliance Checklist I Give Clients

1. Decide deposit vs. move-in fee before you list. In Chicago, the fee is still the lower-risk option for most small landlords, but watch the new law's effective date and put every fee on page one of the lease.
2. If you take a deposit, open the segregated account first (Chicago) and disclose the institution.
3. Issue the receipt at signing. Don't mail it later. Later never comes.
4. Collect a verified email address in the lease; the state act now lets you deliver the itemized statement electronically.
5. Calendar three dates the day the tenant moves out: Day 30 (itemized statement with receipts or estimates, or Day 30 return with itemization in suburban Cook), Day 45 (balance returned), and Day 60 (paid receipts if you used estimates).
6. Photograph the unit at move-in and move-out. Same angles, timestamps on.
7. Deduct for damage, never for wear. If you're unsure which one it is, it's wear.
8. Send the check even when you're angry. Withholding a deposit to punish a bad tenant is how a tenant who owes you $6,000 leaves the courthouse owing you nothing.

What Happens in Court When Landlords Get It Wrong

Here's the pattern I see weekly. Landlord files an eviction for $5,000 in unpaid rent. Tenant gets a lawyer, often free of charge to the tenant, because fee-shifting pays the lawyer. The lawyer doesn't defend the nonpayment; they counterclaim on the deposit. No receipt, no interest payment, commingled funds, a day-47 return; any one works. Suddenly your collection case is their payday: $1,800 deposit back, $3,600 in damages, and a fee petition that can dwarf both. The landlord ends up writing the check.

It also wrecks the timeline. A clean eviction in DuPage runs $895 in legal fees and moves fast; a Chicago eviction at $1,600 stays on schedule only if there's nothing to countersue about. Deposit counterclaims add months. If you're holding a deposit for a tenant you're about to evict, tell your lawyer about it at the first phone call, before filing, not after. Our free eviction resources cover what that first call should include.

The Math on One Real Deposit Demand

I have written these demands myself, so I know the math. In one 2023 Chicago file, the landlord kept a $1,492 deposit in full. The deduction list said "smoking damage" and nothing more. The lease file had no deposit receipt and no RLTO summary. Here is what the demand claimed:

Item	Basis	Claimed
Deposit back	The full deposit	$1,492
Deposit penalty	Two times the deposit	$2,984
No receipt or summary	Two months' rent plus $100	$2,090
Court costs	Filing fee and service	$352
Attorney fees	Projected through trial	$2,150
Interest	One month	$11
Total		$9,079

The landlord settled for $5,000. That is more than three times the deposit the landlord tried to keep.

I represent property owners only. My Chicago landlord attorney page covers evictions at a $1,600 flat fee, RLTO defense, and leases.

Frequently Asked Questions

How long does a landlord have to return a security deposit in Illinois?

Statewide, for any residential rental: itemize deductions within 30 days and return the balance within 45 days of move-out. And if you never send an itemized statement, the full deposit is due back within 45 days. Chicago's RLTO uses the same 30/45 structure. Suburban Cook County's RTLO requires return within 30 days. Since January 1, 2024, there is no small-landlord exemption from the state act.

Does the Illinois Security Deposit Return Act apply to small landlords now?

Yes. Public Act 103-224 removed the "5 or more units" threshold effective January 1, 2024. If you rent out one unit, the 30/45-day machinery and the bad-faith double-deposit penalty apply to you. The Interest Act is different: it still kicks in only at 25 or more units in a building or contiguous complex.

Can I deduct for cleaning and repainting?

You can deduct for damage beyond normal wear and tear, with documentation. Repainting after a multi-year tenancy and routine cleaning are usually wear and tear. A wine-stained ceiling, a door off its hinges, or a unit that needs a biohazard crew; that's damage. Photographs decide these arguments.

Is a non-refundable move-in fee legal in Illinois?

Yes, today. And the new fee law, now signed, does not ban genuine move-in fees, though it bans "walk-through" fees by name and requires every non-optional fee to appear on the first page of the lease once it takes effect (January 1, 2027 under the trailer bill). It must be labeled and treated as a fee; the moment you start refunding it for good behavior, you've created a security deposit with none of the required paperwork behind it.

If you're holding deposits right now and any item on the checklist made you wince, let's fix it before a tenant's lawyer finds it. I offer free consultations from my office in Lisle and handle landlord work in every Chicagoland county. Call (630) 839-9195 or book a free 30-minute phone consultation; fifteen minutes of prevention beats two times the deposit plus fees.